Kindly suggest me the path in developing an index for various stakeholders of a small finance bank. I am working on a conceptual framework for my research on investigating the factors affecting micro finance. A case of selected small finance bank is taken for this assessment.
Hello Anushree,
a method for developing an index in general for "something" is first of all to investigate the factors and the determinants which affect "this" and in what degree and then composing a weighted average of these factors and determinants. The weights of this weighted mean could be the degree of influence of these determinants.
Hope this is helpfull for you
My friendly regards
Dear Anushree
I am assuming you want a performance measure index to compare how a bank is doing in comparison to their peers. As you want this for various stakeholders (such as stockholders, bondholders, other creditors, employees, customers, et cetera) your index need not be one metric. That is, you can include multiple measures and leave them disaggregated versus averaging (or weighted average) them into a one-number metric like a grade (A, B, C, D, etc.). First, you choose the bank peers that will comprise your index. Ultimately you will have several indexes. For stock market return performance you gather the stock prices (alternatively stock returns) of the bank peer group. This group that comprises the index should not include the bank you are evaluating, unless the n-size is very large, e.g. 100. Other suggested indexes may be based on operations to evaluate liquidity, asset management or efficiency, financial leverage, and profitability. Corporate finance metrics for these categories can come from financial statement analysis literature. Again, you would compile the data from your bank peer group in some averaging process to form your index. For example, for liquidity you may use cash/assets, net working capital/assets, net liquid balance/assets, average collection period, and inventory turnover. You could construct some average of all these ratios or instead leave them on a stand-alone basis for comparison. You can do this for the other operating categories. In addition to the independent calculation and compilation you can collect third-party vendor sources of information. For example, you can gather the bond ratings of the bank peer group from Moody's, and/or Standard & Poor's. Customer satisfaction surveys can be conducted to on the banks in the peer group portfolio to evaluate marketing related metrics. Some suggested readings are:
https://patents.google.com/patent/US20040117284A1/en
http://www.ams.org/journals/bull/1924-30-01/S0002-9904-1924-03859-2/
Thank you so much Mr. Michael & Mr. Raymond. I will work on similar lines.
Regards
Dear Anushree
An banking sector index, generally, is designed to track the stock performance of the main banking companies. The problem you may have when making an index is that not all banks are all homogeneous, so the indices are very good to analyze the evolution of the value of an share over time, or the price of certain assets, including futures and the options based on interest rates, stock indexes, currencies, etc.
To give you an idea for your research, I recommend that you consider the technique of the benchmark, which is widely used to analyze in comparative terms the management between several companies, and that aims take "comparators" or benchmarks managerial decisions and results that belong to organizations and that show best practices in the area of interest, with the purpose of transferring knowledge of best practices and their application. It is not a new technique because the term benchmark or "point of reference" is usually used in the financial industry, but it does not always mean the same in all possible situations.
I hope this idea will be useful.
Regards
PM
Hello Anushree,
It is not difficult to make an index. It has to be useful and be used by shareholders. They have the opportunity to pursue stock market analyzes, indices, financial indicators, rating agencies, investment funds, macroeconomic indicators and others.
The steps needed to build an index are: - banks selection. At the begining you can retain a smaller number of banks. Their number will be further increased; - some of the selected banks' shares will be retained. They will form a sample. Their choice will be made to be representative for all banks;. - giving a share of each sample action, considering that they have different performances; - assembling the actions in a simple form, through a relation. In the beginning, you will consider a simple function, based on simplifying assumptions, after which you will give up, one at a time; - setting a score for the built function; - setting a date and reference value.
Regards
- Badges
- Science topic
- Similar topics
- Psychology
- Mental Processes
- Learning